High Court rejects banks' appeal over charges

Thursday, 26 February 2009 4:38 PM

The Court of Appeal has rejected an attempt by several high street banks to block the Office of Fair Trading from making a decision on the fairness of bank charges.

The announcement comes on the same day Royal Bank of Scotland (RBS) posted the biggest loss in UK corporate history despite Sir Fred Goodwin receiving a pension worth £650,000 per year.

The Court upheld a 2008 ruling, which backed the right of the Office of Fair Trading (OFT) to decide whether banks' terms and conditions are fair.

Which? chief executive Peter Vicary-Smith, said: "The courts have made it clear the banks should now throw in the towel. This case has been going on too long and it's about time they tried to regain some of their dignity and paid customers their dues.

"This whole saga has severely damaged the banks' reputations. If they try to appeal in the face of such a clear decision, they will suffer further losses in the court of public opinion."

Ian Allison, managing director of Bankingrefunds.co.uk, added: "Today's ruling is a triumph for the everyman and brings our greed-ridden banks one step closer to justice."

The OFT has been fighting the banks through the courts for the right to decide what would be a fair charge for going into unauthorised overdraft, and could force lenders to repay millions of pounds in charges.

Martin Lewis, founder of MoneySavingExpert.com, said: "The smiles on the OFT's faces in court shows it's highly likely it will find that charges are unfair. After that, I would hope that within the next year, everyone who's had charges unfairly taken from their bank account will get them back."

However, the banks could take the case all the way to the House of Lords, which would mean a final decision could be delayed until late 2009.

The case was first brought to the courts in 2007, with a ruling handed down in April 2008.

The High Court agreed that none of the historic charges could be seen as 'unfair penalties' - except for some of NatWest's - but did agree the OFT has the right to decide whether the charges are unfair.

In the meantime, anyone who has had an unauthorised overdraft charge levied against them since July 2001 should write to their bank and ask for their money back, Which? advises.

The Financial Services Authority (FSA) has frozen claims while the test case is ongoing, and if the banks appeal again, this is likely to be extended. Under the terms of this waiver, their bank must acknowledge their complaint within five working days.

Mr Lewis added: "It's still crucial, if they've not already, for consumers to start a claim. Those in financial difficulty, such as loss of employment or serious illness, may get cases heard now, as banks have to ensure that cases of genuine hardship are still dealt with during the waiver period.

"For everyone else, there are already 100,000s whose cases are on hold, so when the floodgates do open, the further ahead they are in the queue, the sooner their claim will be processed."

The FSA has warned, however, that the waiver could be dropped and claims could go ahead if progress is not being made in the test case.

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